Money Rules to Break in 2013

Photo by: ThinkstockBy Margot Gilman

"Neither a borrower nor a lender be." Shakespeare's words have stood the test of time, unlike most other bits of money advice you've probably heard. And yet many of us continue to follow old money rules-some outdated, some never good ideas to begin with-that are more likely to cost us dough than save us any. Learn which ones to forget and which new tips really pay off. Photo by Thinkstock.

1. Old rule: Buy stock and let it sit and grow over time. 

New rule: Rebalance your portfolio every year.

If you have a mixed investment portfolio, such as your 401(k) which contains bonds and stocks, buying and holding shifts the ratio of these investments over the years, since riskier vehicles usually grow faster. "You could be taking on more risk over time, which isn't necessarily what you want as you get older," says Eleanor Blayney, a consumer advocate for the CFP Board (the organization that credentials certified financial planners) and the author of Women's Worth: Finding Your Financial Confidence. To avoid this, Blayney suggests setting up your 401(k) to rebalance automatically each year, a standard option with most plans.

2. Old rule: Hope for a big tax refund.

New rule: Be happy if you owe the IRS money. 

Sure, a fat government check can seem like the proper payback for the grueling effort of filing your taxes. But getting a refund means you've been overpaying your taxes-loaning the government an average of $3,000 to $4,000 per year, says Blayney. It's better to have that money working for you all year long in an interest-making account. Blayney suggests using tax software or talking to a professional to get the amount of taxes you pay closer to what you actually owe.

3. Old rule: Pay off your highest interest credit card first. 

New rule: Pay off your low-balance cards first.

If you want to get out of debt with the psychological boost of seeing results quickly, take the new advice above from Angie Grainger, a CPA and financial planner and the author of Principles of Mastery for Wealth and Relationships. Here's why: "If you pay $100 toward the low-balance card, and just $25 toward each of two other cards, when the first card is paid off you'll have $125 to pay toward the second card. When that one's paid off, you'll have $150 to put toward the third," she explains. "Allowing more of your payment to go toward the principal balance will keep you motivated until you retire your debt."

4. Old rule: Protect your job at all costs.

New rule: Your health is the most vital thing.

There's nothing good about losing a job. But it's not the leading reason people file for personal bankruptcy in the US: A medical crisis is. "Medical debt is about not having the insurance you need and not having a reserve fund to cover you when you can't work due to illness," says Blayney. The solution's obvious: Eat right, exercise and guard your health as well as you can. But as important: Always have medical insurance, even if it's a high-deductible policy that covers only catastrophic situations, and continue it if you ever become unemployed.

Related: Check out these healthy afternoon snacks that keep you full.

5. Old rule: Invest in your home to protect its value. 

New rule: Invest in yourself.

Will putting $5,000 toward a bathroom renovation get you more money when you sell it some day? You might see a higher return investing in your own human capital. "The amount you earn over your lifetime, taking inflation into account, is likely to top $1 million," says Blayney. "Few of us live in a million-dollar home. So improving your ability to earn money through education or training is likely to be a better investment."

Related: Discover 15 clever uses for household items.

6. Old rule: Lend money only to family members.

New rule: Don't even do that.

Say your son's in a financial bind and you have the resources and desire to help. Lending money is a lovely thought, but it could permanently harm your relationship. "The problem is, there's no formal arrangement to keep people honest," warns Blayney. "If money gets tight, your son will probably pay the cable bill and car loan before he pays you." If this happens, the potential for resentment is enormous. So loan money to a family member only if "you're prepared, mentally and financially, for it to become a gift," advises Blayney.

7. Old rule: Buy in bulk. 

New rule: Buy only what you need when you need it.

Sure, each toothpaste tube in a six-pack costs less than a tube bought individually. But buying in bulk doesn't save significant money. "You have to put up a lot of cash," points out Grainger. "That's money that's not in your pocket. Plus, there's the real risk you won't use all your purchases." And buying more can mean consuming more. "You may get a better deal on a case of yogurt, but now you have to eat all of them before they expire," says Grainger. "I'd rather have $20 than two dozen yogurts I don't want to eat," she says.

8. Old rule: Never pass up free money.

New rule: Be wary of giveaway offers.

It's great to get a bargain-except when that bargain costs you money you wouldn't have otherwise spent, says Blayney. That second pair of shoes that you got for half price-well, if you didn't need them in the first place, then the thrill of the deal lured you into spending money you didn't need to. That free trial subscription is free only until the cancellation deadline-and who remembers when that is? And if you finance, say, a family room sofa at 0% for two years because you couldn't afford to buy it outright, then near the end of two years you have a depreciating asset that the kids have spilled on, and you're still paying for it. "It doesn't feel like free money then," says Blayney.

Related: Learn about these 9 buys that are cheaper online.

9. Old rule: Balance your checkbook every week. 

New rule: Automate your banking and check in once a month.

It's important to reconcile your finances, but the old-fashioned way-with paper, pencil and your checkbook register-is so last century. There's plenty of room for arithmetic errors, and the task's sheer tedium may dissuade you from doing it regularly enough. But the ATM shouldn't be your sole source for knowing what your account balance is-there's a lag for both adding deposits and taking debits. It's smarter to sign up for online services through your bank, so you can track payments, withdrawals and deposits and even set up automatic bill paying for fixed monthly payments, like your mortgage. You still need to check on your account regularly and make sure everything is correct, but "computers don't make as many mistakes as humans," says Blayney, "and reviewing automated banking statements helps make you more informed about your finances."